Munich, Germany: Housing Supply (Un)Responsiveness and Urban Planning

Photo by ian kelsall on Unsplash

Munich's housing market (really) needs help to keep up with population growth, which is leading to affordability issues. The study (What Makes Munich's Housing Shortage: A District-Level Analysis of Housing Supply Responsiveness and Urban Planning Metrics By Xueying Huang) examines the responsiveness of housing supply to price changes across Munich's districts and how it relates to urban planning factors.

Key findings:

1. Munich's housing supply is inelastic, responding minimally to price changes in most areas. Supply changes typically stayed within 0-2.2%, while price changes varied from 2% to over 7%.

2. Housing supply responsiveness is strongly correlated with measures of housing density, particularly Plot Efficiency (PE) and Residential Floor Space Density (RFSD).

3. Strict zoning and building regulations significantly constrain housing supply:

   1. Local development plans (Bebauungspläne) and §34 of the Federal Building Code (BauGB) tightly control building volume and density.

   2. These regulations limit floor area ratios and building heights, restricting developers' ability to increase housing density.

   3. New buildings must conform to the surrounding character in areas without formal plans, further limiting densification.

4. Municipal housing projects heavily influence changes in housing land use, while private developer contributions appear fragmented and dispersed.

5. Central areas generally show lower supply elasticity compared to peripheral areas.

6. The Housing Land Occupation Ratio (HLOR) did not significantly correlate with supply elasticity, suggesting land availability may not be the primary constraint.

7. Social housing projects tend to expand through larger land plots, while profit-driven developments show a mix of more minor expansions and contractions.

The details: The study used district-level data on housing prices, building permits, and various urban planning metrics. It calculated supply elasticity and conducted regression analyses to identify correlations. GIS data and spatial analysis were used to examine changes in land use.

• The study analyzed 17 district-level areas in Munich during 2012-2015 and 2018-2020.

• It used the price elasticity of housing supply as a measure of supply responsiveness.

• Multivariate regression analysis explored relationships between supply elasticity and urban planning metrics.

• The study utilized Flächennutzungsplan (FNP) and ATKIS data to examine housing land designation and utilization changes.

Bottomline: Munich's housing market faces significant challenges, with supply struggling to keep pace with demand. The findings suggest that

1. Government investment in social housing is the primary driver of housing supply growth, but it can't simply keep up with the way things are now.

2. Restrictive building regulations significantly constrain government actors' and private housing developers' ability to respond to market pressures.

To address this issue effectively, Munich may need to reevaluate its approach to urban planning and building regulations, balancing the need for increased housing supply with other urban development objectives.

That said, areas with densely developed housing plots show limited potential to increase density further, even when demand would support it. This highlights the complexity of the challenge, where physical constraints intersect with regulatory limitations.

Worth noting: Munich's zoning and building regulations play a significant role in shaping the housing supply:

• The Flächennutzungsplan (FNP), or preparatory land-use plan, outlines intended land uses but has limited direct control over development in built-up areas.

• While the FNP can be modified without formal amendment for areas up to 70,000 sqm, this flexibility is still limited by overall urban development objectives.

These restrictions help explain why areas with high Plot Efficiency (PE) show limited ability to respond to increased housing demand, as developers face significant constraints in increasing density even when market conditions would support it.